2015 Affordable Care Act & Employment Law Update

Presented By:

Chris Olmstead, Esq.

&

Bill Hammett

NEW LEGISLATION

Healthy Workplaces, Healthy Families Act of 2014

• Governor Brown signed the HWHFA in September 2014

• Takes effect on July 1, 2015

• Mandates a minimum of 3 paid sick days per year.

• Company-offered sick/PTO comply if equal to or better than state mandate.

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Which Employers Must Provide the Leave?

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• Covers most CA employers

• No exclusion for small employers

Exclusions

• Some employees covered by CBAs

• Construction industry + CBA

Which Employees Are Entitled to Leave?

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• Applies to employees who after July 1, 2015:

-work in CA;

-30 days or more;

-within a year from commencement of employment.

For What Reasons Can An Employee Take Paid Sick Leave?

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• Employee’s own qualifying need; or

• Family member’s qualifying need for diagnosis, care, or treatment of an existing health condition; or preventive care.

Notice / Use

• Employee must provide reasonable notice if need foreseeable.

• If unforeseeable, as soon as practicable.

Who Is a Family Member?

• Child (regardless of age or dependent status)

• Parent

• Spouse/registered domestic partner

• Grandparents/grandchild

• Sibling

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Reasons an Employee Can Take Paid Leave?

Not limited to sick leave:

• Employee also can use leave if the employee is a victim of domestic violence, sexual assault, or stalking.

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When Can Employees Start Taking Paid Leave?

• Employers may require that employees wait until the 90th day of employment to start using paid sick leave.

-But accrual starts from day one.

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Accrual Method

• Under the law, employees accrue one hour of sick time for every 30 hours worked (including overtime hours).

• Must report accrual/use on wage statements.

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Accrual Method

Alternative: Lump sum 3 days each year.

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Accruals for Exempt Employees

Exempt Employees:

• Accrual is based on a 40-hour week.

• If normal workweek is less than 40 hours, accrual based upon that employee’s normal workweek.

• Does not matter if employee works more than 40 hours a week

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Cap on Usage

• Employers can cap use (but not accrual) of paid sick leave at 24 hours (or three days) in each year of employment.

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Cap on Accrual

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• Employer may limit or cap accrual to a maximum bank of 48 hours or six days of paid sick time.

Carry Over Required

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• Employees carry over all accrued paid sick days to the following year of employment (may impose a six-day cap).

-Exception = lump sum 3 day method

• Employer still can limit use to 24 hours a year.

Upon Termination

• Not required to pay out accrued sick leave.

-Exception: employer uses PTO policy to comply with sick pay mandate. PTO is always cashed out.

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Retaliation Prohibited

Employers cannot:

• Deny an employee the right to use accrued sick time.

• Require an employee to find a “replacement” for his or her time off.

• Discriminate/retaliate against an employee for exercising his or her rights under the Act.

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Sick Pay

To Do:

• Draft sick pay policy for all employees.

• Adjust existing PTO/sick policy to comply with state mandate.

• Adjust accrual rate, add to pay stubs.

• Be sure to place caps on use and accrual.

• Consider breaking out separate sick pay policy to avoid “tainting” PTO.

City of San Diego Min Wage Increase / Sick Pay?

• $11.50/hr by January 1, 2017

• 40 hours of sick pay per hear

Status: June 2016 Ballot

Will it be retroactive?

Prevailing Wage

AB 1939: If project deemed “public

works” after the fact, contractor

can recover increased labor costs

associated with prevailing wage

obligations.

SB 266: Tolls statute of limitations

for DIR to bring prevailing wage

assessments.

AB 1650 Public Works Projects

“Fair Chance Employment Act”

Public works contractors prohibited

from asking job applicant about

criminal history. (Except where

required by law.)

Does not prohibit subsequent

criminal background checks.

AB 1897 – Labor Contractors

Liability for wage violations of “labor contractors” (e.g.

staffing companies)

• Wages

• Workers’ Comp Insurance

• OSHA

Excludes: Companies < 25 employees, or < 6 supplied

workers. Certain PEOs.

To Do: Due diligence on labor contractors.

SB 477 – Foreign Labor Contractors

• Obtain foreign workers for California companies? Register with Labor Commissioner by Jan 1 2016

• Employer who knowingly contracts with a non-registered contractor faces fines

• Prohibits overcharging foreign workers for housing.

• To do:

Review contracts for

registration and

indemnification

AB 1660 Undocumented Resident Driver’s License

Amends FEHA.

National origin discrimination

includes DMV license issued

to illegal residents.

Prohibits asking for driver’s

license, unless permitted by

law. (I-9, drivers.)

AB 2751 Retaliation Penalty

• Amends Lab.C. §98.6, 1019, 1024.6

• Existing $10,000 civil penalty for retaliation – e.g. false immigration report

• Now awarded to affected employees.

• Protects workers’ right to update of SSN, name, or federal authorization to work (narrowed prior rule).

OSHA

New Reporting Requirements

• Report within 24 hours if

hospitalization

• Eye losses, amputations

24 hours

• Certain vehicle accidents

Effective January 1, 2015

Cal OSHA

• 50% penalty reduction for

abatement of hazard

• New: submit proof of

abatement prior to penalty

reduction.

• Also: require abatement of

serious hazards during

appeals.

Unemployment Insurance

• SB 1314 – Reconsideration and Appeals

-As of July 1, 2015:

-Deadline extended from 20-30 days

• SB 1083 – UI Disability Certification

-On or before January 2017:

-EDD will use opinion of a Physician Assistant

SB 1360 Rest & Recovery Periods

• Amends Lab.C. §226.7

• Rest breaks and heat recovery periods are paid time (on the clock).

• Declaratory of Existing Law

• Follows SB 435, granting 1 hour pay for missed recovery periods.

Case Law Update

Employee Expenses

Cochran v. Schwan’s Home Service Inc., 228 Cal.App.4th 1137 (2014).

Issue: Employees with “unlimited data plans” use personal cell phones for company business. Must a company reimburse the employees?

Employee Expenses

Cochran v. Schwan’s Home Service Inc.

Answer: Yes.

• If use of cell phone is mandatory, then must pay a “reasonable percentage” of phone bill.

-What is “mandatory”?

-What is a “reasonable percentage?

Employee Expenses

Cochran v. Schwan’s Home Service Inc.,

To Do:

(1) Inventory “mandatory” cell phone use.

(2) Limit/prohibit use by employees.

(3) Study usage/typical costs.

(4) Consider a fixed amount reimbursement, with offer to pay for business-related excess charges.

Arbitration

Iskanian v. CLS Transportation, 59 Cal.4th 348 (2014).

• Allows class action arbitration waivers to be enforceable under California law.

-Procedures that interfere with the Federal Arbitration Act (FAA) are preempted.

-Overturns previous CA Supreme Court precedent

-BUT no PAGA waivers.

To Do: Use/revise arbitration agreements

Healthcare Reform Update

4 Types of Employees

Full Time Employee – 30 Hours/wk (1,560/yr)

Part Time Employee – 29 or less hours worked/week

Variable Hour Employee:

Unable to reasonably determine if this employee is expected to work 30 or more hours/week

New Employee that works 30+ can still be considered “Variable” if employment is expected to be of limited duration. (Retail worker during Christmas)

Seasonal Employee

Does not work for more than 120 consecutive days

Who must you offer benefits to?

• All Full Time Employees (30+ Hours per Week)

• All Employees who qualify after ‘Measurement Period’

Measurement Periods…in 2015

To determine who is eligible, the ACA allows for very specific look back periods.

• Measurement Period: 3-12 Months• Period is determined by the employer

• If employee does not work an average of 30 hours/week during this period, they are not eligible

• Administrative Period: Up to 60 days (per CA law)

• This is when you would apply a waiting period and enroll the employee who was deemed eligible

• Stability Period: No shorter than 6 months and must be at least as long as Measurement Period• Employee must be enrolled during this time, regardless of their hours worked

Welcome to Washington!

114th Congress

Political Landscape

Washington is fractured.

The GOP is struggling with comprehensive health reform strategy, as is the Democratic leadership.

The good news is that there are some small signs of bipartisan cooperation!

The Numbers

House

188 Democrats, 246 Republicans, 1 Undecided

Senate

44 Democrats, 54 Republicans, 2 Independents

Is it still possible that the judiciary branch could unravel health reform?

The Supreme Court just granted “certiorari” in the King v. Burwell case, which challenges to the ability of the federal government to issue health insurance premium tax credits and enforce the employer mandate via federally facilitated and partnership exchanges.

The Supreme Court will consider the case in 2015 with oral arguments on March 4 and a decision likely at the end of June 2015.

If premium subsidies in federal exchange states are struck down, that doesn’t mean that the insurance policies subsidy recipients are enrolled in are struck down too, just the means 82% of exchange consumers are using to pay for those subsidies.

How Will Congress Respond?

“What the King case does is gives us an opportunity and a reason to come to a consensus sooner so, when we get the ruling of the Supreme Court in June, we are then prepared to say, ‘Here is what is better for the American people in terms of affordability, quality and choice,’”

Sen. John Barrasso (R-WY), Chairman of the Senate Republican Policy

Committee.

“If [the justices] do what I think they should do — if they really read the law and act according to the way the law is written — then we’re going to have a real problem in America. The American public’s going to be asking us to act at that point in time. So we’ve got to figure that out.”

Sen. Ron Johnson (R-WI), who is up for reelection in 2016 in a state that Obama carried twice.

“The onus is on us to present a logical solution prior to that case ever being heard. Maybe the court will feel more confident making a decision if in fact there is a legislative solution [to the subsidy problem] that is realistic.” - Senator Richard Burr (R-NC)

Potential Congressional Action in ‘15

Targeted PPACA repeal and change measures that focus particularly on aspects of

the law that impact jobs and employers

◦ 40 Hour Bill

◦ Employer Reporting

◦ Scope of Employer Mandate (50-99)

◦ Small Group Size 1-100

Exchange Improvements

◦ Subsidies

◦ Functionality for Agents and Others

◦ SEP Changes

Market Reforms

◦ Age Band Relief

◦ Composite Rating

◦ Copper Plan/Out of Pocket Changes

Small Business Tax Credit Changes

HIT Tax Delay

40 Hours is Full-Time (Proposed)

Introduced on January 6 and on January 8

House passed H.R. 30 by a vote of 252-172.

Senators Susan Collins (R-ME) and Joe Donnelly (D-IN) sponsored S. 30: Forty Hours is Full Time Act

Obama Administration has already issued a veto threat

CBO Score is $53.2 billion over 10 years

GOP has to figure out how to get to 67 votes in the Senate.

Senate HELP hearing on legislation expected by the end of January

Employer Limitations on Paying Individual Premiums The Obama Administration continues to clarify their position that if an

employer creates some type of premium reimbursement arrangement to pay for health coverage, then such arrangements are subject to all federal health law market reform requirements, even if the reimbursement is for individual insurance coverage premiums.

The Departments’ prior guidance explains that employer health care arrangements, such as HRAs and employer payment plans, are group health plans.

That means such arrangements are subject to the group market reform provisions of the Affordable Care Act, including the prohibition on annual limits under Public Health Service Act (PHS Act) section 2711 and the requirement to provide certain preventive services without cost sharing under PHS Act section 2713.

Such employer health care arrangements will not violate these market reform provisions when integrated with a group health plan that complies with such provisions. However, an employer health care arrangement cannot be integrated with individual market policies to satisfy the market reforms.

Consequently, such an arrangement may be subject to penalties, including excise taxes under section 4980D of the Internal Revenue Code.

Reporting Requirements Under Section 6055 & 6056 (of the ACA)

Q & A

Section 6055 – IndividualReporting

Purpose of 6055 is to aid the IRS in enforcing the individual mandate.

2 Forms:

◦ 1094-B – Transmittal of Health Coverage Information

◦ 1095-B – Health Coverage

1095-A is out this year for individuals that received a subsidy from Covered CA

Section 6056 – EmployerReporting

“…The purpose of 6056 reporting is to assist with the administration of the employer shared responsibility provisions of the ACA…” (Federal Register/Vol. 78, No. 174)

Applies to all entities with 50+ FTE’s (aka “applicable large employer”)

Entities with 250+ W2’s MUST file 6056 electronically

Each Full Time employee is a separate return

Section 6056– Employer Reporting

Employer also has 2 Forms:

◦ 1094-C – Transmittal of Employer Provided Health Insurance Offer and Coverage Information

This document is an aggregate report on your employee population

◦ 1095-C – Employer provided health insurance offer and coverage

◦ This report is PER EMPLOYEE

Employer communications with employees, Exchanges and the IRS

Source: Ernst and Young Washington Council

Step 1

►Employer provides employees with information about coverage and availability of Exchanges

Step 2

►Employee provides Exchange with information to determine eligibility for the premium tax credit

Step 3

►Exchange verifies information and makes preliminary eligibility determination regardingthe premium tax credit

Step 4

►Exchange notifies employer that employee may receive a premium tax credit

►Employer has right to appeal Exchange’s determination of employee’s eligibility within 90 days

Step 5

►Employer files informationwith IRS and employee –

►§ 6056 requirements►Employee files personal

return

Step 6

►Assessment of employer tax penalties

►Employer has right to appeal tax liability to IRS

Department of Labor (DOL) Audits

• New Auditors1,800

• Goal of $1.7B in fines from

Businesses$1.7B

What is on an actual Audit?

Summary Plan Description (SPD)

Wrap Document

Benefit Booklets

Summary of Benefits and Coverage (SBC)

Documents describing employees cost and benefits

List of individual(s) who directly or indirectly administer plan

Specimen of all COBRA notices

Grandfathered Health Plan notices

Checklist (most critical items)

Summary Plan Description (SPD)

◦ Provides employee info on when they can enroll, how service and benefits are calculated, when and in what form benefits are paid, and how the file a claim for benefits

Also:

◦ Cost sharing provisions (including premiums, deductibles coinsurance and copayment amounts

◦ Preventive Services coverage

◦ Provider networks

Wrap Plan Document

◦ All-ERISA covered benefit plans must, by law, be administered with a written plan document.

Insurance contracts generally contain most required provisions…but…not all federal laws are contained in state based insurance contracts

◦ Provides additional legal protection for the employer

All Insurance Plan contracts

◦ Master application, renewals, etc.

Checklist (most critical items)

Employee Handbook

When was the last time you reviewed?

◦ Have you updated your waiting period?

◦ Does your handbook reflect 30 hours being full time?

◦ Have you adjusted the definition for Seasonal Employees?

◦ Did you introduce a “Measurement Period?” If so, is it noted in your handbook?

◦ Have you included the definition of a “Variable Hour” employee?

◦ Do you have proof your employees all received their handbook?

Employee Handbook (cont.)

• Good Text vs. Bad Text

- Vague = Bad

- Too many words = Bad

- Specific = Good

- Concise = Good

Employee Handbook (cont.)

• Most important thing to remember:

- Clear, concise communication on

- What makes an employee eligible (or ineligible)

- How much are you asking them to pay

- And how frequently

- What is the COBRA continuation availability

- Notification of Covered California as an option

So…what do we do next?

Step #1: Do the easy stuff

Review and update your employee handbook

Does your insurer plan to allow Grandmothering?

◦ Is it the best option? Did you do it?

Is your waiting period in compliance with CA/ACA rules?

◦ 4 options (sometimes): 1st of the month following date of hire

1st of the month following 30 days

1st of the month following 60 days

90 Days

Step #2: Adopt Notice Requirements

Install a compliant Wrap Document

◦ SPD & Plan Doc (+ federal legal jargon)

Plan to distribute SBC’s & SMM (if applicable)

Adopt new COBRA notice

Distribute Exchange notices

Distribute Grandfathered plan notifications (if applicable)

Step #3: An eye on the future

Determine if you will be subject to the Employer Reporting requirements in Section 6056 of the ACA (covered earlier).

Non-Discrimination rules are forthcoming

◦ Are you excluding any class of employees from eligibility?

Does a tax favored arrangement (HSA/FSA/HRA) make sense?

Is your current employer contribution strategy still making sense?

◦ Is it sustainable?

Take advantage of all your resources.

HR Tools & Resources

Want access to HR 360?

Please reach out to me (Bill@HammettHealth.com) to get your log in and password.

Questions?

Christopher W. Olmsted, Esq.

Christopher.olmsted@ogletreedeakins.com

(858) 652-3111

Bill Hammett

Bill@HammettHealth.com

(619) 668-2378